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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI N. V. VASUDEVANAND SHRI JASON P BOAZ
Per Jason P Boaz, Accountant Member
This appeal by the assessee is directed against the order of the CIT(A)-6, Bangalore, dated 24.03.2017 for Assessment Year 2012-13.
Briefly stated, the facts of the case are as under:
2.1 The assessee, a non-resident foreign company, engaged in the business of granting software licenses, filed its return of income for Assessment Year 2012-13 on 28.09.2012 declaring NIL income. A revised return was filed on 29.11.2012
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wherein the income declared was NIL. The case was selected for scrutiny and the draft order of assessment was concluded vide order dated 27.03.2015. Subsequently, the final order of assessment was concluded under section 143(3) r.w.s. 144C of the Income-tax Act, 1961 (in short ‘the Act’) vide order dated 26.05.2015 wherein the assessee’s income was determined at Rs.25,69,53,097/-. This was in view of the Assessing Officer (AO) holding that the income of Rs.25,69,53,097/- earned by the assessee for granting licences to Indian customers is Royalty in terms of the Act and DTAA and is exigible to tax in India. In coming to this view, the AO followed the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Samsung Electronics Co. Ltd., (345 ITR 494) (Kar) and the decision of the Co-ordinate Bench of this Tribunal it the assessee’s own case in ITA No.550/Bang/2011 for Assessment Year 2006-07 wherein it was held that when licence is granted to make use of software by making copy of the same, storing it in the hard disk of designated computer and to take back-up copy of software; then what is transferred is the right to use copy of software for internal business as per the terms and conditions of the agreement and payments made in that regard would constitute royalty as per the provisions of section 9(1)(vi) of the Act read with the DTAA. The CIT(A) dismissed the assessee’s appeal vide the impugned order dated 24.03.2017.
3.0 Aggrieved by the order of CIT(A)-6, Bengaluru, dated 24.03.2017 for Assessment Year 2012-13, the assessee has filed this appeal before the Tribunal, wherein it has raised the following grounds:-
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Ground Nos.1 and 13 (supra), being general in nature, no adjudication is called for thereon.
Ground Nos. 2 to 8 – Income earned from sale of software licences to customers in India – Royalty
5.1 In these grounds (supra), the assessee, inter alia, challenges the orders of the authorities below in holding that the payments received by the assessee for sale of software / licences were held to be ‘Royalty’ under section 9(1)(vi) of the Act and under the DTAA. The learned AR for the assessee fairly conceded that though the decision of the Hon’ble Karnataka High Court in the case of Samsung Electronics Co. Ltd., (345 ITR 494) (Kar) is under challenge before the Hon’ble Apex Court, it presently holds the ground; being the jurisdictional High Court.
5.2 The learned DR for Revenue supported the orders of the authorities below and prayed that their orders be upheld on this issue as the same is covered in favour of Revenue and against the assessee by the binding decision of the Hon’ble jurisdictional
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High Court of Karnataka in the case of Samsung Electronics Co. Ltd., (345 ITR 494) (Kar).
5.3.1 We have heard the contentions of both parties and perused the material on record; including the judicial precedents cited. The issue before us for consideration / adjudication in this appeal is whether or not the learned CIT(A) was justified in holding that the payments received by the assessee in respect of sale of software licence to its Indian customers, were in the nature of royalty under section 9(1)(vi) of the Act and taxable as such. We find that apart from the decision of the Hon’ble Karnataka High Court in the case of Samsung Electronics Co. Ltd., (supra), in the decisions in the case CIT Vs. Synopsis International Old Ltd., (212 taxman 454) (Kar.) and the decisions of the Co-ordinate Bench of this Tribunal in the assessee’s own case in ITA No.550/Bang/2011 for Assessment Year 2006-07 and in IT(IT)A Nos.1296 and 1321/Bang/2014 dated 07.04.2015 for Assessment Year 2011-12 also, this issue has been held against the assessee and in favour of Revenue. In the order of the Co-ordinate Bench of this Tribunal for Assessment Year 2011-12 (supra), it was held as under at paras 13 and 14 thereof:-
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5.3.2 Respectfully following the decisions in the cases of Hon’ble Karnataka High Court in the case of Samsung Electronics Co. Ltd., (supra) and CIT Vs. Synopsis International Old Ltd., (supra) and of the Co-ordinate Benches of this Tribunal in the assessee’s own case for Assessment Years 2006-07 (supra) and Assessment Year 2011-12 (supra), we uphold the decision arrived at by the CIT(A) as we find no reason to interfere therein. Consequently, ground Nos. 2 to 8 of the assessee’s appeal are dismissed.
Ground Nos. 9 to 12 – Charging of Interest under section 234B of the Act
6.1 In these grounds (supra), the assessee challenges the action of the CIT(A) in upholding the charging of interest under section 234B of the Act as mandatory in the case on hand; without taking into account the provisions of section 209(1)(d) r.w.s 195 of the Act. It is contended that the CIT(A) erred in not following the decision of
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the Tribunal in the assessee’s own case for Assessment Years 2006-07 and 2011-12 (supra), wherein the charge of interest under section 234B of the Act, in identical circumstances, was held to be unsustainable and consequently deleted.
6.2 The issue for consideration and adjudication is whether or not interest under section 234B of the Act is chargeable in the case on hand. After having given careful consideration to the rival contentions and perusing the material on record; we find that the issue is covered in favour of the assessee by the decision of the Co-ordinate Bench of this Tribunal in the assessee’s own case in IT(IT)A Nos.1296 and 1321/Bang/2014 dated 07.04.2015 for Assessment Year 2011-12; wherein the Bench upheld the action of the CIT(A) in holding that the assessee is not liable for payment of interest under section 234B of the Act as the assessee is non-resident. At paras 4 to 9 thereof, the Co-ordinate Bench has held as under:-
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6.3 Respectfully following the decision of the Co-ordinate Bench in the assessee’s own case for Assessment Year 2011-12 in IT(IT)A Nos.1296 and 1321/Bang/2016 dated 07.04.2015, we hold that the assessee in the case on hand, being a non-resident, is not liable for payment of interest under section 234B of the Act and therefore delete the interest charged thereunder. We hold and direct accordingly. Consequently, grounds raised by the assessee on this issue are allowed.
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In the result, the assessee’s appeal for Assessment Year 2012-13 is partly allowed.
Order pronounced in the open court on this 23rd day of July, 2019.
Sd/- Sd/- (N. V. VASUDEVAN) (JASON P BOAZ) Vice President Accountant Member Bangalore. Dated: 23rd July, 2019. /NS/* Copy to: 1. Appellants 2. Respondent 3. CIT 4. CIT(A) 5. DR 6. Guard file By order
Assistant Registrar, ITAT, Bangalore.